Inter-bank lending rates rose sharply last week to an average of 15.08 per cent, from 14.25 per cent recorded the previous week, as the Nigerian National Petroleum Corporation and Nigeria Deposit Insurance Corporation made large withdrawals, putting commercial banks in deficit with the Central Bank of Nigeria.

 Reuters quoted a dealer as saying, “The market closed on a negative balance as a result of the large cash outflows from the system last week with cost of borrowing closed higher at the inter-bank.”

Traders said the market opened with a negative balance of N129.55bn ($820.72m) on Friday, compared with a positive balance of about N65bn last Friday.

The secured Open Buy Back rose to 14.50 per cent, from 13.75 per cent the previous week, representing 250 basis points above the CBN’s 12 per cent benchmark rate, and 450 percentage points above the Standing Deposit Facility rate.

Overnight placement jumped to 15.25 per cent, compared with 14.24 per cent, while call money traded at 15.50 per cent, against 14.75 per cent the previous week.

Another dealer was quoted as saying, “We expect rates to keep inching up this week until another round of budget disbursal possibly before Friday.”

Dealers said they expected the market to remain illiquid for the early part of the week, because of expected further cash outflows into foreign exchange purchases, and investment in treasury bills and bonds.

The naira weakened against the United States dollar on the inter-bank market on Monday, on strong demand by some banks filling their customers’ needs for dollars, as dollar liquidity gradually dries up in the market.

The naira closed at N157.90 to the dollar compared with the N157.30 to the dollar on Friday.

Source: Punch